BlackBerry Ltd. and Dollarama Inc.: Buy the February Dip?

The S&P/TSX Index climbed 76 points on February 26 to close above 15,700 points. Although the TSX has declined 3% in 2018 thus far, the index has climbed almost 1,000 points since dropping below 14,800 points in early February. Investors should not resign themselves to missing out on an opportunity to buy into a significant dip. There are still a number of terrific options on the TSX that have been battered over the past two months. Let’s look at two stocks today that performed extremely well in 2017 but have dipped to start 2018. Dollarama Inc. (TSX:DOL) Dollarama stock has declined…

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The S&P/TSX Index climbed 76 points on February 26 to close above 15,700 points. Although the TSX has declined 3% in 2018 thus far, the index has climbed almost 1,000 points since dropping below 14,800 points in early February. Investors should not resign themselves to missing out on an opportunity to buy into a significant dip. There are still a number of terrific options on the TSX that have been battered over the past two months.

Let’s look at two stocks today that performed extremely well in 2017 but have dipped to start 2018.

Dollarama stock has declined 3% in 2018 as of close on February 26. Dollar stores continued to demonstrate strong growth in North America in 2017. Dollarama eased concerns over the impact of minimum wage hikes in Ontario in its third-quarter earnings release. The company appears confident that drags on competition will offset losses and eliminate any need to raise prices on merchandise.

Investor sentiment with regards to Dollarama and other stores was dealt a blow after Statistics Canada released retail sales for December 2017. Experts and analysts were surprised as retail sales fell 0.8% to $49.6 billion compared to the same time in 2016. The largest decline was seen in Ontario, where sales fell 1.6%. Retail sales at general merchandise stores declined 5.3% year over year.

Dollarama is expected to release its 2017 fourth-quarter and full-year results in late March or early April. The stock currently offers a modest dividend of $0.11 per share, representing a 0.3% dividend yield. Shares of Dollarama are still up 46% year over year. Dollar stores are in expansion mode with even the e-commerce giant Amazon.com, Inc. moving to launch an “Under $10” category on its website.

Strong overall retail sales in 2017 are likely to propel Dollarama to a positive final-quarter report, and the stock remains an attractive addition after an early year dip.

BlackBerry reached a four-year high in early January of $18.14 but has since dropped to $15.93 as of close on February 26. Shares have surged 72.4% year over year on the back of impressive software and services revenue growth. BlackBerry released its 2017 third-quarter results in December.

The company posted record software and services revenue of $190 million. BlackBerry has made impressive strides in its move from hardware to software by establishing a foothold in mobile cybersecurity and leading the way in Canada in its entrance into the autonomous vehicle industry. Both of these industries are expected to post double-digit compound annual growth into 2020. BlackBerry is in a fantastic position to benefit from this massive growth.

BlackBerry may also be setting its sights once again on carving out a bigger slice in the mobile phone industry. Chief Commercial Officer Francois Mahieu gave an interview at the Mobile World Congress 2018 in which he said that he hopes the company will be able to capture between 3% and 5% of the premium phone market. However, this is an ambitious target. BlackBerry sold 170,000 phones in the third quarter and would need to sell between two and three million per quarter to reach this lofty goal.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon and BlackBerry. BlackBerry is a recommendation of Stock Advisor Canada.

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